Quarterly Report I 16/17

September 2016 – November 2016, Diamyd Medical AB (publ), Fiscal year 2016/2017

Reporting period, September 1, 2016 – November 30, 2016

• Net result amounted to MSEK -4.3 (-4.3)
• Net result per share amounted to SEK -0.2 (-0.2)
• Cash flow from operating activities amounted to MSEK -4.7 (-4.8)
• Liquid assets and short term investments amounted at the end of the period to MSEK 26.4 (24.9)

Significant events during the reporting period

• Manufacuring of proprietary GABA-drug starts and the scientific advisory board is expanded
• MPA approves extension of trial where Diamyd® is administered directly into the lymph nodes. Interim report for the trial indicates positive clinical course
• Positive effect of Diamyd® supported in new scientific article
• Board member of Diamyd Medical resigns from the Board
• Diamyd Medical expands activities to both type 1 and type 2 diabetes as well as rheumatoid arthritis with proprietary GABA drug

Significant events after the reporting period

• GABA-specialist to the Board of Diamyd Medical
• Last participant has completed last visit in a five-year prevention trial with Diamyd®
• GABA manufacturing process scaled up for GMP production

About Diamyd Medical

Diamyd Medical is dedicated to finding a cure for diabetes and other serious inflammatory diseases through pharmaceutical development and investments in stem cell and medical technology.

Diamyd Medical develops the diabetes vaccine Diamyd®, an antigen-specific immunotherapy based on the exclusively licensed GAD-molecule. Now six clinical studies are ongoing with Diamyd®. GABA constitutes alongside with the diabetes vaccine a key asset in Diamyd Medical and the Company uses its GABA in-licensed technology to develop a proprietary GABA drug product. Diamyd Medical is one of the major shareholders in the stem cell company NextCell Pharma AB. Diamyd Medical also has holdings in the medtech company Companion Medical, Inc., San Diego, USA and in the gene therapy company Periphagen, Inc., Pittsburgh, USA.

Diamyd Medical’s B-share is traded on Nasdaq Stockholm First North under the ticker DMYD B. Remium Nordic AB is the Company’s Certified Adviser. Further information is available on the Company’s website: www.diamyd.com.

CEO comments

Dear Shareholders and Readers,

The first quarter of the fiscal year have included activities and new results well in line with the long-term strategy for our drug candidates; the diabetes vaccine Diamyd® and GABA.

Intralymphatic administration of Diamyd® continues to look promising and may prove to be the way forward to strengthen the positive clinical effect that meta analyses of subcutaneous administration have demonstrated. There is a clear rationale for this; studies in the allergy field have shown that intralymphatic administration compared to subcutaneous administration provides a better distribution of antigen in the lymph nodes and strengthens the effect of the adjuvant, which enhances the clinical efficacy of immunotherapy. As more and more people are living with type 1 diabetes and the costs to society are rising, there is a growing need for a drug that can delay or stop the autoimmune destruction of the insulin producing cells. Our ambition is to be the first to reach the market with a drug that can preserve endogenous insulin production and thus reduce the serious short- and long-term complications in patients with type 1 diabetes.

The diabetes vaccine Diamyd® is aimed to interrupt the autoimmune attack on the insulin-producing beta cells in type 1 diabetes by specifically reducing the immune response against the endogenous protein GAD65 that the immune system attacks by mistake. The purpose of our second drug candidate GABA is to improve beta cell health and to stimulate their regrowth, effects that new research with GABA supports. Along with the diabetes vaccine this opens up for a complete cure of type 1 diabetes.

I am convinced that the new GABA findings will lead to increased commitment to research and greater competition in the GABA related drug development. This would be positive for Diamyd Medical, as it creates an increased interest in our licensing portfolio. At the same time, it increases the demand on us to be at the forefront of strategic product development to remain competitive.

The ongoing evaluation and scale-up of the manufacturing of a proprietary GABA drug product provides Diamyd Medical with the conditions to gain full control to conduct clinical studies and develop formulations for both type 1 diabetes and our other areas of interest, type 2 diabetes and rheumatoid arthritis. With strong expertise in GABA also in our Scientific Advisory Board and with Professor Torbjörn Bäckström as affiliated Board member, expert in GABA related diseases, we are well equipped for future challenges.

Stockholm, January 25, 2017
Ulf Hannelius
President and CEO of Diamyd Medical AB (publ)

Significant events during the reporting period

Diamyd Medical starts producing proprietary GABA drug and expands its Scientific Advisory Board

Production of a proprietary GABA drug starts. Concurrently, the Scientific and Medical Advisory Board is expanded with two leading experts in rheumatoid arthritis and type 2 diabetes, Professor Daniel Furst, University of California, Los Angeles (UCLA) and Associate Professor Michael Alvarsson, Clinic Director at the Karolinska University Hospital.

The Swedish MPA approves extension of trial with Diamyd® directly into the lymph nodes. Interim report for the trial indicates positive clinical course

A second interim report from DIAGNODE-1, an open clinical pilot trial where the diabetes vaccine Diamyd®is administered directly into the lymph nodes shows that the treatment after 15 months appears to be safe and tolerable and that the clinical progression in patients is positive in terms of the body’s own capacity to produce insulin, as well as long-term blood sugar and insulin dose. The trial has been approved by the Swedish Medical Products Agency and the Ethics Committee to be expanded from nine to fifteen patients.

Positive effect of Diamyd® is supported in new scientific article

A meta-analysis of previously published clinical studies shows that the diabetes vaccine Diamyd®with great probability reduces the loss of C-peptide, a measure of endogenous insulin production, by 15-20%. The analysis is made by internationally leading researchers in type 1 diabetes, and has been published in the journal Diabetologia.

Board member of Diamyd Medical resigns from the Board

Board member Fredrik Åhlander has been convicted (accepted a punishment of 15 600 SEK in fines) for an insider offense. The offense occurred before Åhlander was elected to the Board of Diamyd Medical and did not concern the Diamyd Medical share. Fredrik Åhlander requests own resignation from Diamyd Medical's Board with immediate effect.

Diamyd Medical expands activities to both type 1 and type 2 diabetes as well as rheumatoid arthritis with proprietary GABA drug

GABA constitutes alongside with the diabetes vaccine Diamyd®a key asset in Diamyd Medical. To further develop GABA’s potential, Diamyd Medical expands, in dialog with leading experts in the field, its activities towards both type 1 and type 2 diabetes as well as rheumatoid arthritis.

Significant events after the reporting period

GABA-specialist to the Board of Diamyd Medical

Professor Torbjörn Bäckström, Umeå University, accepts an invitation from Diamyd Medical's nominating committee as affiliated member of the Board of Diamyd Medical, to be formally elected at the next general meeting.

Last participant has completed last visit in a five-year prevention trial with Diamyd®

The last participant has made its last visit after five years in a trial in which the diabetes vaccine Diamyd®is being tested as a treatment to delay or prevent that children at high risk for type 1 diabetes is presented with the disease. Results from the trial will be presented by Associate Professor, MD, Helena Elding Larsson, Principal Investigator and sponsor of the study, at the diabetes conference American Diabetes Association (ADA), to be held in San Diego in June, 2017.

GABA manufacturing process to be scaled up for GMP-production

A first amount of GABA is produced and the manufacturing process is to be scaled up for GMP production. The Company also highlights that two recently published scientific articles support GABA's relevance in the treatment of diabetes.

On-going clinical trials with Diamyd®

Type 1 diabetes is a devastating disease which requires daily treatment with insulin to sustain life. The importance of finding a cure should not be underestimated. The diabetes vaccine Diamyd® has been used in clinical studies with more than 1,000 patients and has shown a good safety profile. Subsequent development is focused on combination trials to enhance efficacy. Diamyd® is easy to administer in any clinical setting. The potential annual market is estimated to several billion dollars per year. Six researcher-initiated clinical trials are ongoing combining Diamyd® with various other immunomodulatory compounds; etanercept, ibuprofen, vitamin D and GABA.

• DIABGAD- 1 – COMBINING DIAMYD® WITH IBUPROFEN AND VITAMIN D

A placebo-controlled trial, where Diamyd® is being tested in combination with ibuprofen and vitamin D. The trial comprises a total of 64 patients between the ages of 10 and 18, recently diagnosed with type 1 diabetes, and has continued for a total of 30 months. The aim of the combination treatment is to preserve the body’s own capacity to produce insulin. The trial runs at nine clinics in Sweden and is led by Professor Johnny Ludvigsson at Linköping University, Sweden. 30 month results from the trial are expected during the first half year of 2017.

• DIAGNODE -1 – DIAMYD® IN LYMPH GLANDS IN COMBINATION WITH VITAMIN D

An open label trial, where Diamyd® is administered directly into lymph nodes in combination with treatment with vitamin D. The trial comprises fifteen patients between the ages of 12 and 30 newly diagnosed with type 1 diabetes, and will continue for a total of 30 months. The aim of the trial is to evaluate the safety of the combination treatment and the effect on the immune system and the patients’ insulin producing capacity. The trial is led by Professor Johnny Ludvigsson at Linköping University, Sweden. The first patient was included in the trial in February 2015.

• GABA/ DIAMYD® – COMBINING DIAMYD® WITH GABA

A placebo-controlled trial, where Diamyd®is being tested in combination with GABA. In accordance with agreement with Jansen Research & Development and JDRF the trial has expanded to comprise 95 patients between the ages of 4 and 18 recently diagnosed with type 1 diabetes. The trial will continue for a total of 12 months. The aim of the combination treatment is to preserve the body’s residual capacity to produce insulin. The trial is led by Dr. Alexandra Martin at the University of Alabama at Birmingham, USA. The first patient was included in the trial in March 2015.

• EDCR IIa – COMBINING DIAMYD® WITH ETANERCEPT AND VITAMIN D

An open label trial, where Diamyd®is combined with etanercept and vitamin D. The trial comprises 20 patients between the ages of 8 and 18 who have been newly diagnosed with type 1 diabetes, and will continue for a total of 30 months. The aim of the trial is to evaluate the safety of the combination treatment and the effect on the immune system and the patients’ insulin producing capacity. The trial is led by Professor Johnny Ludvigsson at Linköping University, Sweden. All patients were included in September 2016 and 6 month results are expected during the second quarter of 2017.

• DiAPREV-IT 1– DIAMYD®

A placebo-controlled trial, where Diamyd® is being tested in children at high risk of developing type 1 diabetes, meaning that they have been found to have an ongoing autoimmune process but do not yet have any clinical symptoms of diabetes. A total of 50 participants from the age of four have been enrolled in the trial, which has lasted for five years. The aim of the trial is to evaluate whether Diamyd® can delay or prevent the participants from presenting with type 1 diabetes. The trial is led by Dr. Helena Elding Larsson at Lund University, Sweden. Five year results are expected in June 2017.

• DiAPREV-IT 2 – COMBINING DIAMYD® WITH VITAMIN D

A placebo-controlled trial, where Diamyd® is being tested in combination with vitamin D in children at high risk of developing type 1 diabetes, meaning that they have been found to have an ongoing autoimmune process but do not yet have any clinical symptoms of diabetes. A total of 80 participants between the ages of 4 and 18 will be enrolled in the trial, which will last for five years. The aim of the trial is to evaluate whether Diamyd® can delay or prevent the participants from presenting with type 1 diabetes. The trial is led by Dr. Helena Elding Larsson at Lund University, Sweden. The first patient was included in March 2015.

*** The above is an excerpt from the report. To read the complete report, please visit www.diamyd.com, or see attached PDF ***

For more information, please contact:
Ulf Hannelius, President and CEO, phone: +46 736 35 42 41

Diamyd Medical AB (publ), Kungsgatan 29, SE-111 56 Stockholm, Sweden
Phone: +46 8 661 00 26 Fax: +46 8 661 63 68 E-mail: info@diamyd.com Reg. no: 556242-3797

This information is information that Diamyd Medical AB is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out above, at 08.30 CET on January 25, 2017.

Note: This document has been prepared in both Swedish and English. The Swedish version shall govern in case of differences between the two documents. The document contains certain statements about the Company’s operating environment and future performance. These statements should only be regarded as reflective of prevailing interpretations. No guarantees can be made that these statements are free from errors.

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